What is Manufacturing Cost?

Production cost is also called manufacturing cost, which refers to the cost of production activities, that is, the cost incurred by an enterprise to produce a product. Production cost is a currency representation of the use of various resources in the production process. It is an important indicator for measuring the technology and management level of an enterprise. Includes direct material costs, direct wages, other direct costs, and indirect costs of distribution and transfer; the lender registers the manufacturing cost of the finished product transferred to the "inventory goods" account. The debit balance at the end of the period represents the cost of the product that has not been completed in the production process, and the cost of the work in progress at the end of the period. The detailed ledger of this account shall be set up according to the product type. ^[1]

Cost of production

Production cost is also called manufacturing cost, which refers to the cost of production activities, that is, the cost incurred by an enterprise to produce a product. Production cost is a currency representation of the use of various resources in the production process. It is an important indicator of enterprise technology and management level. Includes direct material costs, direct wages, other direct costs, and indirect costs of distribution and transfer; the lender registers the manufacturing cost of the finished product transferred to the "inventory goods" account. The debit balance at the end of the period represents the cost of the product that has not been completed in the production process, and the cost of the work in progress at the end of the period. The detailed ledger of this account shall be set up according to the product type. ^[1]

Production costs are items incurred by a production unit to produce products or provide services.

Under market economy conditions, product cost is a compensation measure of production consumption. Enterprises must use product sales income to offset various expenses in the production process of products in order to determine profitability.

Production costs are

Accounting for production costs

I. Accounting of various production costs for industrial production, including production of various products (finished products, self-made semi-finished products, etc.), homemade materials, homemade tools, and homemade equipment

Various production costs incurred by enterprises (agriculture) in agricultural production can be changed to "5001 Agricultural Production Costs", and the cost accounting objects (consumable biological assets) can be determined for planting, animal husbandry, forestry and aquaculture , Productive biological assets, public welfare biological assets, and agricultural products) and cost items to collect and allocate expenses.

Enterprises (real estate development) can change the subject to "5001 Development Cost".

2. Detailed accounting can be carried out according to the basic production cost and auxiliary production cost.

The basic production cost should be set up according to the basic production workshop and cost accounting objects (product varieties, categories, orders, batches, production stages, etc.) detailed accounts (or cost calculation orders, the same below), and set up columns according to the prescribed cost items .

Third, the main accounting treatment of production costs.

(1) The direct production costs incurred by the enterprise shall be debited for the subjects (basic production costs and auxiliary production costs), and credited for "raw materials", "inventory cash", "bank deposits", "payable employees" and other subjects.

The manufacturing costs that should be borne by each production workshop are debited to the undergraduate subjects (basic production costs and auxiliary production costs) and credited to the "manufacturing costs" subject.

The auxiliary production workshop is the labor services and products provided by the basic production workshop, enterprise management department and other departments. At the end of the period (month), it is allocated to each beneficiary according to a certain allocation standard. The deduction of the subject (basic production cost) and "administrative expenses" , "Sales Expenses", "Other Business Costs", "Construction in Construction" and other subjects, credit undergraduate subjects (assisted production costs).

The finished products that have been produced by the enterprise and have been checked into the warehouse, as well as the self-made semi-finished products that have been put into the warehouse, should be debited to the "inventory goods" and other subjects at the end of the period (month), and credited to the undergraduates (basic production costs).

(2) All expenses incurred in the production of agricultural products by productive biological assets shall be debited to the title of "Agricultural Production Costs", and credited to "Inventory Cash", "Bank Deposits", "Raw Materials", "Payable to Employees", "Accumulated depreciation of productive biological assets" and other subjects.

Expenses that should be shared by agricultural products, consumable biological assets, productive biological assets, and public welfare biological assets in the agricultural production process, debit the "Agricultural Production Cost-Common Expenses" account, and credit "Inventory Cash", " Bank deposits "," raw materials "," payable employees "," agricultural production costs "and other subjects.

At the end of the period (month), the above shared costs can be allocated according to a certain distribution standard, debiting "agricultural production costs-agricultural products", "consumable biological assets", "productive biological assets", "public welfare organisms" Assets "and other credits are credited to" Agricultural Production Costs-Common Expenses ".

The cost of agricultural products that should be harvested by productive biological assets should be distributed among various varieties of agricultural products in a reasonable way; if agricultural products have not been harvested, they should also be distributed between agricultural products that have been harvested and those that have not yet been harvested.

The agricultural products harvested by productive biological assets shall be debited to the "Agricultural Products" subject and the undergraduate subjects (Agricultural Products) shall be credited according to their actual costs.

4. The production cost account is a costing account. The borrower registers all the expenses that should be included in the cost incurred during a certain stage of the production and operation process, and the lender registers and transfers out the actual costs that have ended a certain stage of the production and operation process. ^[2] The debit balance at the end of the period reflects the cost of products in process or the cost of agricultural products that have not yet been harvested.